Citi: Junk Bonds Losing Luster, Lagging Stock, Commodities Selloffs

By Michael Aneiro

Citi sounds another beleaguered, if not bearish, note on the junk-bond market. “Relative to other asset classes, we do not view high yield as attractive at current levels,” Citi writes, pointing out that junk bonds haven’t sold off over the past week even though equities and commodities have. But don’t go selling yet, Citi writes:

Unlike our recommendations from last May and the prior May (when we explicitly suggested reducing high yield exposure), we don’t believe investors should shift their portfolios on the latest commodity sell off. Part of the reason is the asset class’ illiquidity but it’s also due to the shifting equity/credit relationship which requires a larger equity sell off for a given high yield decline than we saw in 2012 and 2011.

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